Gold futures drop almost 3% for the week

PolyaLesova

SAN FRANCISCO (MarketWatch) — Gold futures closed lower Friday, with a loss of nearly 3% for the week, as a rally in the U.S. dollar against the euro helped send prices for the precious metal to their lowest settlement since mid-October.

The dollar rose against the euro on speculation that low euro zone inflation may prompt the European Central Bank to lower interest rates.

AFP/Getty Images

Federal Reserve Chairman Ben Bernanke

Gold for December delivery
US:GCZ3
fell $10.50, or 0.8%, to settle at $1,313.20 an ounce on the Comex division of the New York Mercantile Exchange. Prices lost 2.9% for the week and settled at the lowest level since Oct. 16, according to FactSet data tracking the most-active contracts.

“Gold has broken an addition level of support at $1,320 and is quick approaching the critical $1,300 level,” said Tyler Richey, analyst for the 7:00’s Report, which offers daily markets commentary. “The recent rally back above $1,350 has turned out to be yet another head fake as gold seems to be settling back into a wide range with $1,300 remaining pretty magnetic.”

The euro “has come under heavy liquidation as currency traders readjust their positions believing that the ECB will now become progressively more dovish as it tries to battle the deflationary forces in the region, while the Fed will turn to tightening as it considers a taper of [quantitative easing] early next year,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management.

The ISM manufacturing data indicated the U.S. economy continued to improve, albeit slowly, said Mimani. “As the economy shows signs of improvement, investors reason it may make more sense to deploy capital in growth (stocks) rather than insurance/asset protection (gold).”

And meanwhile, “gold investors continue to closely watch the Fed and ‘exit plans’ from its bond-buying program,” he said.

Other metals traded on Comex saw modest moves.

January platinum
US:PLF4
tacked on $3.50, or 0.2%, to $1,451.90 an ounce — down about 0.3% for the week. December palladium
US:PAZ3
climbed by $1.45, or 0.2%, $738.25 an ounce — down about 1.3% from last Friday’s close.

December copper
US:HGZ3
closed at $3.30 a pound, down less than half a cent, or 0.1%. Futures prices were up about 0.9% for the week.

On Friday afternoon, metals-mining stocks followed the losses in gold and silver, though U.S. equities were mixed. The Philadelphia Gold and Silver Index
XAU, -1.78%
fell 3.1%, set to lose 7.6% for the week, while the NYSE Arca Gold Bugs index
HUI, -2.08%
traded 3.3% lower, down 7.1% from a week ago.

The SPDR Gold Trust
GLD, -1.12%
fell 0.9% and was trading down about 2.9% for the week.

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